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Bargain hunting for the sport

DJSP Enterprises (DJSP), one of the largest providers of processing services for the mortgage and real estate industries in the United States, today had its Q1 conference call after announcing results last night. They lowered their full year guidance and since then, the stock has fallen over 25%. I want to use this opportunity to hit on the main points of the call and re-iterate a strong ‘Glen Bradford’ buy. I’m upgrading the stock.

I listened into the conference call. Lowered guidance in most situations comes from future problems down the pipeline. That isn’t the case this time. Lowered guidance this time is just a temporary setback. Company prices should be a discount of their future earnings — and in this case, the discrepancy between price and value appears to be fairly large right now. The main points:

Two of their largest customers are merging, and in my opinion, this is going to make Q2 and maybe the beginning of Q3 temporarily weak. That said, I would argue that DJSP is incredibly likely to continue working with this new merged entity and get the backlog of foreclosures that they have built up.

They are in the process of picking up a second REO customer in my opinion, but the time that it takes to ramp up here might push those earnings into Q1 2011 at this point.

Fannie Mae (FNM) and Freddie Mac (FRE) have been touring the facilities to make sure that DJSP has the capacity to ramp up processing.

David Stern has been getting phone calls from his customers on a daily basis to make sure that DJSP has the capacity to handle a future ramp up in capacity.

There is currently a rumor circulating suggesting that foreclosure processing is being pushed back another thirty (30) days for mid-summer election purposes.

In the Q&A section, someone yelled at David Stern for not disclosing this setback through an 8-K earlier. In my opinion, taking all things into consideration, David Stern has been making the right judgment calls. The future for foreclosure processing is brighter than ever.

I want to reiterate that this is a strong buy and I’m looking for over 100% gains in the next year — especially at these prices.

Disclosure: Glen Bradford owns DJSP (He doubled up today).

Wake up America
By Glen Bradford

I’m an MBA now. That means that everything I say is a fact, right? In the last few years, I started with less than nothing and essentially graduated into early retirement. It’s been a while since you’ve heard from me. In that time, I’ve had several incredible learning experiences and I have many things to share. That said, sharing everything in one article would not be effective and I’ll do my best to summarize my thoughts and outline actionable ideas. I advise that move forward and ignore this article if you’re not interested in improving who you are, financial situation included. I want to first cover an overall perspective of what’s going on. I honestly believe that you need to have an idea about what is going on before you can really take any coordinated, planned, successful action. Hence, I default to doing nothing. All man’s miseries derive from not being able to sit quietly (Blaise Pascal). Note that Warren Buffett and Mohnish Pabrai would agree with me here.

Don’t be a wimp, buy the dip. The market dip we’ve seen is likely to rebound. Crashes happen when things are getting worse. As far as I can tell, the European bailout is going to be contained and deleveraged without much more panic. China is slowing down their growth engine and adding oil so it doesn’t overheat and break (smart). When people were on TV Thursday telling me that “Any sale is a good sale,” I promptly logged in and bought as much as I could. Heck, if I can name the price, I guarantee I can name one where I won’t lose money. I feel like I’m trading paperclips for gold sometimes.
The Next Black Swan. Alright, this one is going to be a shocker, but everyone and their mom is in denial. During finals week, you could have found me in the fetal position on the floor for 2 reasons. The first of which is that I got the pleasure of having a kidney stone. The second of which is that I was in disbelief to which we are completely ignorant about hitting the peak production of the non-renewable resource that has been powering our economy for the last century. Nouriel Roubini, called “Dr. Doom” by the New York Times, forecasted a housing bust and an oil shock in 2006. Well, I’m telling you that we haven’t even seen the oil shock. Sure, we had high prices, but they went away. Yes, I’m advocating preparation for something like oil supply being 10 million barrels a day less than what we have today in the next 5 years. I guess the price of oil could more than double from here, easy.

Redefining Inflation. Recently, I’ve questioned the theory in Economics that I’ve been taught which suggests that inflation is mostly proportional to the amount of money in circulation. In my opinion, money is a store of value, which basically enables you to purchase someone else’s personal effort/energy at a later date. If the cost of energy doubles, that dollar is going to go less far. Just something to think about. I have recently written about Buffett’s Burlington Northern purchase being savvy (http://www.thestreet.com/story/10637235/1/buffetts-burlington-bet-was-savvy.html). I’ve got news. As this plays out, he’s going to look like a genius. He’s got the moat of the cheapest transportation, and is in line with trade between the USA and China.

The Game Plan. Alright, so what have I been doing? Well, I believe that people will live in denial until they are forced to face the facts. So, the markets are likely to rise in the near term. That said, in real terms, we are way overpriced right now in terms of long term valuations. I’ve been loading up on CHEAP companies like Longwei Petroleum (LPIH), China Armco (CNAM), Lotus Pharmaceuticals (LTUS), and DJSP Enterprises (DJSP). It’s laughable how cheap these are right now. Also, I’ve been looking into stocks that I’ll be allocating into when oil goes up. So far, I’ve got Chesapeake Energy (CHK) and Gushan Environmental Energy (GU) at the top of my list of ideas to load up on. And then, I’ll probably try to allocate into S&P500 puts when the VIX finally decreases to a point where buying protection is cheap again. If you have ideas, I want you to send them to me.

Disclosure: Glen and his limited partners own Longwei, China Armco, Lotus Pharmaceuticals, and DJSP Enterprises.

I’m the type of person that mostly doesn’t do anything until prices start getting slammed, at which point it’s my priviledge to be on a position where I get to use my skills to sort through as many companies as I can to find the stocks that are getting slammed the hardest and have become the most undervalued in the world.

mos – like how it got crushed really hard when oil prices crashed, same as chk, and gu – mental note for peak oil strategy.
qkls – no
ccme – yes, need to relook at the numbers myself – but a yes even without looking
sdth – prolly a doubler but out of my price range
tpi – i like this one now. for a long hold. http://investorshub.advfn.com/boards/read_msgs.aspx?board_id=9884&NextStart=40685&BatchSize=100
csol – bad q, but the next one i guess is going to be good? lol… turnarounds.
yong – yep
steeledge thinks CWBYF (.01) CNDWF(.52),CFQWF(1.05), and NHR(.35) warrants are going to be homeruns
cwbyf – ??? no clue but i read something about hydrogen fuel cells i think
cndwf – china cord blood again? nah
CFQWF – isnt this wowjoint now? isn’t cclwf better?
NHR – nah
xodg – haha, private financers. haha
cmm – dropped big on big volume very recently, caution! someone might know something bad.
ecbi – prolly net income around 15 mil, shares of 14M, Price? $3.50 is where the low is going to go, likely. no clue. 50%+ growth
hghn – nah
amcf – it’s ok, not great, probably a doubler or so easy, could be wrong here, just looked at numbers
qkls – price 5.15, shares 40M, market cap 200M, revs 250M., bv 100M, earnings 20M, nah
cpqq – sure
bwow – ni = 12M, warrants @ $5, 16.8M shares eps = 0.71, puts exercise price at p/e of 7 with cash of $36M. 2.14 cash/share, bleh, not compelling
cbpo – p/e of around 7 i think on a forward basis? staying away.
wwin – too expensive
cadc – p/e of 5.6, turnaround? NOPE, the non GAAP cuts eps in half. lmao
xnyh – could be really cheap, but too small for me
dyp – $91M of cash? cash – total liabilities = $60M 30M shares, takes out $2 of eps, real price around $5 P/E around 8-9, last quarter sucked, no thanks
nep – lpih is cheaper
cgyv – nah
chfi – bleh, where are they?
cgdi – a pink now
jada – like it
visn – i cant find the price here
cntf – nah
sgzh – expected up and running july, yes
cncm – lol no
WKBT – yes, Q1 EPS = $0.17 P/E of 4.5 and growth…Sales = $13.96M…Net Income = $4.45M…Cash & Equiv = $18.1M…A/R UNDER $1M…Total current liabilities = $10.7M….And they’re paying taxes !! Share price = $3.75.

http://sec.gov/Archives/edgar/data/1484042/000114420410028519/v185037_10q.htm

hfgb – dilution

Stocks I bought today? Sure:
CNAM, CCLWF, LPIH, LTUS, DJSP (marginable)

My twitter post: $$ $CNAM $LPIH $DJSP $CCLWF $LTUS – Conviction Buys! I feel like the Beast in Beauty and the Beast in the Wolf Scene http://bit.ly/brnikT

CCLTF / CCLWF: Here is their march presentation http://www.megaupload.com/?d=557XJU8E

They have 9M common shares outstanding.
They have 15M warrants outstanding (7.5 strike).
They will get 1.2M common shares for making earn-out in 2009.
For them to get 2010 earnout they need to show 30%+ growth.
For them to get 2011 earnout they need to show 30%+ growth.
They have some earn-outs based on $15+ price-per-share.

The common is currently BELOW the strike price of the warrants, as per GAAP accounting the warrants do not count at all towards the share count. Once the price is above $7.5 the warrants will count via the treasury method. That means that when the common is at $10 (Its now at $7, thats a very nice gain) the stock will be at a P/E of 5 by the treasury method.

If you do not like the treasury method, that is fine. Assume all the warrants have been exercised and there are 25M shares outstanding. In this scenario you must ALSO give the company 113M in cash from the warrant exercises. This means, assuming no other cash on the balance sheet, that the company has $4.5 in cash PER share. With 25M outstanding EPS for 2009 is $1.

Thus on a (P – Cash / EPS) basis, (7 – 4.5) / 1 = 2.5x.

Care to show me something else cheaper (based on 2009 numbers) growing at 25%+ with a decent balance sheet? Hopefully something that provides warrants so I can get insane leverage for years to come on that growth?

-Fernando

Well,

I am pretty sure that I’m graduating at this point. Hurray for me. Grades are in and somehow my teachers passed me. This would have never happened in undergraduate school, where they grade you on your ability to perform. Engineering was fun. Everything made sense. Anyway, I went through my entire college career’s grades and adjusted them so that I could graph them to illustrate the disconnect that I’ve been feeling this last year. It came out as expected.

So, this first graphic is simply the Grade shift that I’ve applied to graduate school grades to adjust them to the type of grade I think I actually deserved (2nd column), compared to the (1st column) grade I got.

This next graphic shows my college career cumulative GPA and where things went fine and dandy and my GPA was putting me into Honors every semester and I was top of my class, until I started to disagree with some of the fundamentals.

Anyway, the bottom line here is that I actually think that my inability to learn things I disagree with in the long run is going to be incredibly advantageous. Unfortunately, institutions reward the ability to reproduce their methods with higher marks. This was great for me when I agreed with their methods. This was terrible for me when I started to disagree.

Thinking for yourself may hurt your GPA. Thinking for myself has paid for my entire college degree. It’s a trade off. Most of my teachers in the beginning praised me for being at the top and finishing number 1 in several of my engineering weed-out classes that had failure rates so high that the university was trying to crack down. But, near the end, my teachers were pulling me aside, advising counseling, questioning my job-prospects, and asking me what I was looking for or trying to do. Yes, I will admit that I was actually trading stocks during my final exams in some cases… or that I finished 4 hour finals in under an hour to escape to make trades or even strategically used the bathroom to keep tabs on stuff. I always figured things were more important than school if the net present value of the thing was greater than that year’s tuition.

I mean, what would you do in March 2009 when companies are trading at P/E’s of around 0.25 and growing at double digit rates? I went nuts. I offered to pay people 50% of any money that they gave me and I lost in the next 5 years. I did that in late February, in anticipation of the bottom, actually. But, I will admit that I am one lucky duck. Chance favors the prepared.

Would you sit and reproduce theories that emphasize targeting corporate leverage ratios and encourage companies to repurchase their stock as their stock multiples increase, effectively buying their own stock back at higher prices?

Would you price companies based on the volatility of similar companies in the same industry?

OR, would you quickly assemble a discounted cash flows and guess a reasonable discount rate, quickly finish the final exam, borderline pass, and earn a fortune?

What I do isn’t for everyone. That’s a given. It’s for the kind of people that when they see an opportunity or a change in how life is going to work, you are willing to change what you do. The glass is half-full, always. Question Everything, Wake up. I’m now convinced Peak Oil is going to happen by 2015. My dad thinks I’m just as crazy as when I was listening to Conseco conference calls and laughing hysterically as uninformed investors asked uninformed questions, and panic sold to me at around 30 cents. I don’t talk about opportunities from the sidelines. I don’t comment on what I could have done. I capitalize.

I seek to continuously improve my methods. Kaizen. I’ve been exposed to lots of great concepts that work and lots of things I disagree with. This is balance. I think the best way to talk about the concept of Peak Oil is to use the Socratic Method. It’s tough as nails to talk about something scary and make friends. This is why politicians don’t do it. They’ve learned to strategically avoid questions and make it sound like they answered them.

Dr. Doom got the housing bust right. He got the oil shock right. He’s been overly negative lately, but I think that his long term focus is correct, it’s just that economists aren’t so good at the short term most of the time. Peak Oil will increasingly become a fact, if it isn’t already. Everyone knows we have a limited supply of non-renewable resources, but nobody is willing to admit that our time is as close as it can be to the peak of the rate of production. I say we hit in 2004. We’ve been at plateau since then. Drop is likely to come by 2012, which is ironic because that’s the year that everyone who is crazy predicts the end of the world. It sucks that I have to agree with those crazy people. Their reasoning is wrong, but their idea of large problems ahead is accurate. Good news is that problems can be solved. It just takes time, and that, my friends, is the scarcest, most unappreciated resource in the world.

I wrote this as a reply to a post on a forum, but figured it’s worth sharing here too.

There are days at which the most undervalued stocks become cheaper.

How else do you think we got to price levels like we saw last year around this time.

Irrationality can and may persist for long periods of time.

Buying undervalued, growing companies is a hedge against mostly everything. Even if they get cheaper, they’re still better than owning reasonably to overvalued companies. Also, the growth we are seeing will support the EPS in the coming years and in the long run reward those who continue to own.

That said, in times of turmoil, you have to be willing to sell stocks that haven’t gotten crushed even though they may have substantially gone down and are still undervalued in order to purchase even more undervalued companies.

I’ve been tied up in this thing called school for the last year, which hasn’t killed me mostly because there has been a strong, general trend: UP. (I called it, “against all odds.”)

Now, we are still in the glowing halo of recovery, but a lot of the recovery is priced in to the general market. Learn from Jesse Livermore. Bet the trend. As such, even though these companies are the most undervalued in the world and are worth more, rationally, you can take money off the table in the expectation that you will be able to pay less and get more in the future.

Well, that’s the game. I’m finally in a position to play it, no-limits. At this point in time, I’m still mostly all in. I had a feeling this bounce was coming, and even told a few friends the day that it was peaking that I should sell, but I was also in a state of unconscious kidney stone pain and slept through that day.

I think that the recovery won’t last for nearly as long as everyone else does. These blue skies are going to turn to thunder clouds and the black swan of the day is going to be peak oil. Until that day where the demand outpaces supply, however, there are enough ignorance-is-bliss people out there that are going to continue to power equities higher. That said, anyone discounting cash flows should consider factoring in higher oil prices to their models, and also consider the impact of these higher oil prices on the discounted cash flows of the global stock markets as well as the political implications of substantially higher prices.

But, maybe there are enough smart people out there to have put in a market top already? I dunno. I wouldn’t count on it. Common sense is fairly uncommon.

I have an investor with a large position in Goldman Sachs. I got a phone call today. I followed up with an email to this investor. Figured I’d share.

These are my thoughts:

Omaha, Neb. (TheStreet — Warren Buffett issued his first public words in regards to the Goldman Sachs legal crisis on Friday morning, and said he plans to discuss the embattled Wall Street firm at the Berkshire Hathaway(BRK.B) annual meeting on Saturday.

Munger made sure that Journal readers knew that Berkshire Hathaway continues to believe that Goldman did nothing illegal and that the firm is “more prudent and ethical” than its major Wall Street competitors.

Buffett owns GS, Buffett has the ability to describe things in a way that make sense to most people.

Based on this event alone, I think GS will be higher on Monday.

That said, the short term price implications of the mass media proclaiming that GS is the devil is going to cause people to panic sell, along with the fact the stock price is lower. At this rate, 15% or more of the company will be traded today.

Do note that Goldman in 2008 became a bank holding company. Somehow they still do this trading activity. A possibility is that they are forced to spin off their trading arm to someone else.

It seems to me that we are surrounded in misinformation. In the past, good people who haven’t done anything wrong have gone to jail. Even though I think Goldman Sachs hasn’t done anything wrong, except that it still doesn’t make sense to me how they are a bank holding company and they do all this trading stuff on the side, I think that the government in an effort to save face and prosecute the evil on walstreet which most mainstreeters attribute to firms like GS, will move on and press charges anyway.

Rumor has it that the questions and charges they are pressing sound like the type of questions you’d get when you’re in school and you get a guest speaker and that kid you don’t know stands up and asks a question of necessity in order to get class participation points rather than to further any learning.

Then, it’s up in the air whether they’ll win or not.

Sure, if they survive unharmed they are worth $200, but companies can sell at discounts to their intrinsic value indefinately. As a whole, the financial stocks 1 year from today will be higher than they are now. You’re looking at a 15% cut (long term gains) to cut out and switch to something that doesn’t have the whole press problem like Banc of America, Fifth Third, Huntington, etc.

A lot of my trading decisions in March 2009 were based on the premise: “Where is the easy money?” Aka, which stocks are going down for no reason because business is booming and things are great, but hedge funds are being forced to sell. I can’t say that this is the situation for GS. There could definitely be large problems. To me, there are better alternatives. I can think of a handful in the US financial sector off the top of my head. To me, I’d own something else. But, that’s always been the case here which is why I’ve never owned it.

I was out there selling stuff at 50% of what I paid for it, even though a year from then it’s up 100% from where I bought. You don’t have to make your money back the same way you lost it. I was selling undervalued opportunities to buy into even stronger more undervalued opportunities.

That’s the winning mentality. Good luck.

This guy appears to have the same opinion on what’s going on as me:
http://www.thestreet.com/story/10742429/1/stop-turning-goldman-into-scapegoat-opinion.html

Well, I think that I might have taken my last structured class, completing roughly an 18 year journey, leaving me where I am today. I guess my only request would be that if you’re going to start reading this, you might as well finish it, not because it’s probably not going to be that long, but also because without the end I don’t think it’s going to paint a coherent message.

I don’t usually do this — and by that I mean that I don’t usually take time out to reflect on things that have happened as I spend most of my professional vocal strength painting the simple ways to not lose money on the portraits of people’s minds the best way I can.

Anyway, I figure that it’s worth reflecting on what I did in the past. Heck, maybe you can do it better.

Walking out of my classes today was less of a transitional lifetime moment than walking out of my last elementary school 5th grade class. I had just spent the day listening to several MBA final presentations. It was clear to me that the majority relied on their ability to emulate good decision making abilities ignoring the likelihood (in my opinion) that their ideas were refined bullshit. But, what do I know, I think my groups did the best job in both classes even though I didn’t help them present (I have a kidney stone). Our business plan was actually feasible and professional. Our negotiation exercise made a mockery of the idea of an exercise by putting a “study person” against a “party person” in a group project situation where they needed to fairly distribute hours spent working on the project, drinks at the bar, and job contacts. I got that sense of urgency today, like I have been getting throughout a lot of my schooling which always boils down to a couple key points:

1. What am I doing here?
2. How is my time best spent?
3. What am I waiting for?

Anyway, I think the majority of why I still feel like I haven’t transitioned is for 2 reasons.

1. I am relatively unsure whether or not I passed this last series of classes.
2. If I did pass, my parents have asked me to walk for graduation, so I’m tied down here for 2 weeks anyway.

As far as point 1 goes, this is mostly because in negotiations class, my strategy, which is unlike the strategy of any of my fellow classmates (competitive, collaborative, integrative, etc.) is that of avoidance. Needless to say, combine that with the fact my submissions for “reflective essays” were reflective essays and not “meet the rubric” essays, and you have what appears to be a out of control student with a disinterest in negotiations class.

In elementary school, my teachers pulled my parents aside and advised my parents to let me do whatever I wanted to do. I only found out about this last year. My mom quizzed me with math flash cards and I always got good marks in the deliverables but lacked the “neat, orderly, clean” soft skills that the girls always got but the semi-outspoken hard to control boys like me found out of reach.

In middle school, I digressed in my language abilities in 6th grade and took it upon myself to switch schools. Maybe my realization that my language assignments were solely graded on the neatness of my handwriting and not the content led to that. I’ll let you guess how I figured that one out. I spent 3 years in all boy classes taking my language skills to a level where at least I could be taken seriously.

But, I switched back in high school, 10th grade to focus on programming, robotics, and to surround myself with computers. I found myself getting sent to the vice principle’s office *kicked out of class* because I enjoyed handing in completed assignments before the teacher was done handing them out to the class. I took gym class as a 10th grader (a 9th grade class), and didn’t mind being perceived to be incapable of passing it the first time. I worked 10-20 hours a week as a soccer ref, or at the concession stand at SoccerZone on top of school. I volunteered to help repair electronic components of school corporations at the NIESC and I started taking college classes in such things as “Cisco Network Certification.” Everything I ever wrote for school apparently was par or below par, and I was always short of being able to write something worth reading in those days regardless of how hard I tried. Surpise, I got Journalist of the Year Senior Year for hand coding a student driven autonomously updating website thepennant.com which has since been overhauled and looks better and is less buggy. (But mine was cooler). So, I applied to a few colleges and chose Purdue Engineering since my parents went there and I was good at math (I ended up teaching myself 2nd year calculus my winter break senior year of high school so I could pass the AP exam).

I came to Purdue, was going to be in the CEM program – Construction Engineering Management, mostly because my friend did it. It ended up that GE offered me a job in Louisville as an Industrial Engineer (IE). Combined that with the fact that Professor Barany gave a lecture in ENGR 100 suggesting that if you wanted to learn how to make money, IE was the ticket. So, I’m a Co-Op student, working every other semester and I joined a fraternity, pledged over 60 weeks (the hard way), and everything made sense. The cool thing about engineering principles is that they make sense. Completely different from MBA school in some cases. Anyway, at this point, I decided that I wanted to figure out how to value businesses, especially since Barany again came to me and advised the 3+2 program for outstanding undergraduates, which apparently I was.

So, I go to MBA school, and everything goes mostly as expected until my 2nd semester, at which point in my first Finance class, I’m advised to believe that it makes sense due to the EMH that companies should target leverage ratios, and as such, when their stock price goes up, they should buy back their stock at these higher prices to target the leverage ratio. My grades start their decline. Anyway, at this point, I had begun paying my college education from stock market proceeds, with the initial generated capital coming from student loans, my savings from GE, Construction, SoccerZone, cutting grass, home repair, etc. It made more sense to me to learn from minds like Buffett rather than my professors in this case. I began questioning everything.

My first summer as an MBA, I applied for over 500 jobs, the market had crashed, nobody believed in me, but thank god my parents let me come home for the summer to wait out the storm. Suddenly, as I had predicted, people started to believe in me when everything I had said was going to happen started to happen.

Heading back for my 2nd year… It became impossible for me to retain information that I didn’t believe in. My grades are barely passing. Teachers pull me aside and ask me what I want out of my education. I don’t tell them that I’m taking what I can get, but doing my best to overlook that which isn’t important to me. I began putting stock tips at the end of my exams (to make up for the lack of gradable content — actually the teachers could have made hundreds of percentages 100%+ by following them). At this point I dropped the idea of having a focus for my MBA and looked through all the available classes and asked for all the syllabuses and signed up for the ones that seemed the least miserable. I avoided all classes from the finance side. The accounting ones were good. Several concerned faculty members talked to the Dean about me, who then sat me down and asked me about my life and how things are going and advised that I go partake in the free psychological counseling offered at Purdue. She apparently didn’t believe that things were going as well for me as I told her they were. I wouldn’t have believed me either. I realize that the things I’ve been up to sound too good to be true in some cases, and for that I apologize. I’ll try to do less next time and fall in line with expectations. Not. I almost went, until I realized that it wasn’t part of my life-strategy to waste my time and the time of others. I always set the bar so high that I can’t reach it. You’d be surprised how far you can reach if you set your limits high enough. But, be realistic and don’t hurt yourself by overextending. I tried to learn to present more effectively, but came across Dale Carnegie’s book after that class, where in one speech I discredited myself as a speaker by pointing out the flaws in the various education histories of my audience. My grades actually aren’t passing, but now I’m passing on attendance and credibility that I’ve built from being a “good student” in the past.

And so here I am, at the end of the chute. I can’t say that celebrating graduation feels right in this case, because it’s like running a marathon in a sideways direction, tripping over the finish line and disqualifying yourself because you ran it under an alias. But, somehow, right now, I think that I made it. Do I deserve it based on their metrics, heck no I don’t. I definately don’t. But do I deserve it on the principles that I mastered business? Heck yes. I definately do. I mastered business outside of school. School was always that thing that was holding me back from really unleashing my full untapped potential. And here I am now, still stuck, because in 2 weeks, I have to be back here, for my last real class if I am invited to take it — and this class is called graduation. And, if I do graduate on that day, I will finally feel free. I will be done. I will be graduated. I will not be held back.

1. What am I doing here? I’m leaving.
2. How is my time best spent? Somewhere else.
3. What am I waiting for? Nothing. Finally, I made it.

I want to close with outlining an idea that I used to agree with. Anyone familiar with Penelope Trunk’s perspective of an MBA being obsolete or maybe a “waste of time” might think that I whole-heartedly agree with her perspective.

http://blog.penelopetrunk.com/2007/10/04/yahoo-column-are-mbas-becoming-obsolete/

Here’s my take. Does an MBA add that much value to someone’s life? Sure. It buys you 2 years to sit around and think about businesses, how they work, how you could be part of one, and gives you a bunch of ideas and concepts (whether or not they are always right, you are given concepts and ideas) that you can use to apply using various techniques.

Even the people I found myself associating with that I considered to be inept are now better off than when they started, admittedly. Hey, they’re “worth more.” I think that at least they are more likely to ask the right questions, which would more likely lead to them finding the right answers in whatever business setting they are involved in. But sure, maybe 10% of the MBAs out there actually significantly benefit from going to MBA school. My significant benefit comes from the motivation that it’s given me and how it’s continued to build positive feedback loops within me when I reject what I consider to be “silly ideas” that other people broadly accept as truths. It’s driven me to go out and follow leaders, to seek truth, to read influential books and to try to understand incentive structures. The point is, I think that most of the additional value of being an MBA is due to preselection and the differentiating characteristics between the type of people that would think about applying for an MBA and the rest of society.

Sure, I was no Tucker Max. I didn’t party nearly as hard as I could have or have nearly as much social time as I would have liked to, even though freshman year I was voted most likely to fail out of my dorm and I got a 4.0. I was too busy laying a framework for my future. I made some serious personal sacrifices. Ideally, I’d be where I am today but have spent time in classes with better girl/guy ratios and softer disciplines (those classes that people call “easy A’s” never glossed my transcripts — and that’s my own fault). Note that my ratios started suffering in 6th grade and have persisted though completion. Programming, robotics, engineering, and business are just as biased to men as I am to owning undervalued companies, which is a huge bias.

There are a few pieces of advice I’d like to give Krannert, or any MBA school that will take it. But be warned. If you actually take this advice, you might find yourself being the #1 MBA school in the world. it comes with 3 points.

1. The difference between the best MBA schools and average MBA schools is leadership. In order to lead, you must inspire your students with the belief that they CAN do it if they set their minds to it. There was not enough of this “I can do it” attitude at Krannert.
2. Have a class structured on the book “How to win friends and influence people by dale carnegie”
3. I structured a class using similar concepts on glenbradford.com called Buffettology. Teach that.

Class Dismissed.

Zack Buckley wrote this on IHUB, I haven’t read it yet, but it looks useful.

I’ve been thinking about cash flow a lot recently. Here’s a very rudimentary look at the cash flow for alot of our favorites.

Key
? – I was lazy if google finance didn’t have it I didn’t write it down. I will finish the ?’s later
Y – op cash flows matched up with net income
Y great – op cash flows exceeded net income, usually substantialyl
Half – op cash flows were good some years/quarters and bad others in comparison to net income. Or might have been around half of net income
N – cash flows did not mark up closely with net income

I would also like to explore in some of the companies why the cash flows didn’t match up, and then figure out if it is a long term issue. I think that the quality of earnings has to be questioned when a company consistently is not generating cash flows and is piling up either inventory or a/r. It’s a great place to start in terms of looking for fraud/financial misrepresentation.

Skbi for instance has an issue with cash flow. I see that the main reason is that they have had some prepayments. I am relatively comfortable with this, as I see it as better than a rapidly growing inventory and a/r balance. While I am still not as happy as I would be if they were generating an equal or greater amount of cash in comparison to their net income.

Would love to hear others thoughts

Zack

ear cash flow?
djsp
csgh y
bfar y
skbi n
bspm half
chgy y
chbt y
lpih half
jada y
ccgy y
csgj y
puda half
cgdi y
sokf y great
cnam n
enhd half
ckgt y
sgzh y great
wkbt y
chme y
yong n
newn y
onp y
cclwf ?
ccme y
rhgp y
celm ?
chnc n
xnyh y
spu ?
chop ?
akrk n
tstc n
fuqi n
nep y
cgpi ?
sihi n
ghii half
chcg y great
siaf ?
ctxif ?
cyxn y
crui ?
cadc half
txic half
chio y
cpqq y
cnbi n
yhgg ?
hogs y
boy.v
cmfo half
yuii y
jgbo y
nfec n
tpi y
aln half
abc.v ?
cnoa half
cfsg half
chbu y
cga y
ltus y great
llen good 09
cpby n
csr half
cnyd ?
ors horrible
apwr half
liwa half
sclx y
cbpo y great

liz – no
tpi – pretty good, prolly a doubler i dont own.
caah – no profits
snbp – no
axti – no
NNA – no – but fernando says you wont lose money in the long haul, i tend to agree, but dont know (this applies to warrants)
CCKH – no
ccgy – buy this dip when the downward slope slows to a flat. 4/12/2010
boph – dont understand the shareholder structure
srre – nice last couple quarters, mostly due to increases in underwriting sales, which they call “this higher risk business model” also bad balance sheet — pass
aclo – low margins, strong turn around play, could be a tripler or more, but i dont like it positive vibe: “The Company predicts that the supply shortage will continue in 2010, while the average selling price and demand for memory components will be steady. The Company believes its sales turnover and gross profit margin will continue to increase in 2010 as the Company is expanding its business.”
aerlf – dont like the business model
chhe – be careful, auditing firm warns of fraud essentially… company claims to be moving around suitcases full of money
gntq – 1.1M shares + dilution (18.6+.6+2.7+1.7+1.7) = 26.4M shares o/s 11.8M net income, 35M revs, guidance of 15M, .62 per share for 2010 eps
gntq – analysis continued, last time they raised 7.7M, in 2006, in 2007 they made 4.8M, and in 2008 they made 11.8M (from what looks like no additional financing)
gntq – they just cut a dividend for 13.1M in sept 2009, draining the business of cash
gntq – projection time: so they’ll put down 11.8M in income this year just on what they have going, not including the 7.7M of cash they just got. so add 11.8+4.8, and that’s where they’re getting their 15M estimate for 2010
gntq – if they can keep that up, they’ll have 15M in cash going into 2011 and every dollar in cash turning into $0.80 in profits turns 27M in profits
gntq – around $1/share in 2011. the question is how long is this business this scalable?, they just ipoed at 2.7 with warrants, suggesting an opening p/e of 2.5-5, most of the company is still held by ceo (80%) – prolly looking to do another dilution at a higher price
lwll – too small
FLSW – revisited – way too small, unpredictable, feel free to correct me, looks cheap, hank play – this requires a second glance, definately
CRJI – revisited – nah – underperformer in this construction market/year .02 last quarter, could be cheap, worth another look
cckh – nah
sgla – nah – 104M common shares, 1.65M preferreds x 11.36 = 18.74M common + 38.7M outstanding warrants = 161M shares * .45 = 72M market cap = 3x book, .75x sales, P/E = 14.4
lndt – old rmsi – http://investorshub.advfn.com/boards/read_msg.aspx?message_id=47461301&txt2find=rmsi pricey
cfmi – illiquid – not stupid cheap